FTSE 100 closes lower with banks under pressure (AFP)
31.10.2006 13:08 Business
The FTSE 100 index ended Tuesday's session down 63.8 points at 6,108.6, while the broader indices also closed on negative terrain.
Volume was solid, however, with 2.62 billion shares changing hands in 341,342 deals.
Vodafone was the most popular issue with traders exchanging 287 million shares in the telecom behemoth.
BP was the second most traded blue chip, with 127 million shares in the energy giant changing hands.
On Wall Street, the Dow Jones had dropped 88.00 points to 11,892.60 by the UK close, while the Nasdaq Composite lost 31.90 at 2,331.94 and the Standard & Poor 500 index falling back 10.95 at 1,358.10.
US stocks were dragged under as investors took profits after the Dow closed at yet another record high overnight, having almost hit the 12,000 mark during the Monday session.
Tuesday's sentiment was also damaged by a higher-than-expected reading of core inflation, which jumped 0.6 percent in September to record the biggest increase for 20 months.
However, including energy and food, wholesale inflation plunged by the largest amount in more than three years in September as a record drop in the cost of gasoline offset rising prices in a number of other areas.
The Labor Department reported that wholesale prices overall fell 1.3 percent last month, nearly double the decline that analysts had been expecting.
On the corporate front, big merger news was provided by Chicago Mercantile Exchange Holdings, which announced before the open that it has agreed to purchase CBOT Holdings for 8 billion dollars in a move to create a global derivatives exchange with average trading volume approaching 9 million contracts per day.
In response, London Stock Exchange outperformed the UK market, closing just 5 pence lighter at 1,229.
Among the FTSE 100 fallers, heavyweight banks weighed on the index as hopes of consolidation within the UK banking sector faded, prompting investors to cash in on recent gains.
Barclays was off 17.50 pence at 705, Standard Chartered lost 31 pence at 1,407 and Lloyds TSB dipped 14.50 pence at 564.50.
Barclays was also under the cosh after Britain's third-biggest bank said finance director Naguib Kheraj is leaving and will be replaced by Chris Lucas, currently global head of banking and capital markets at accountancy firm PriceWaterhouseCoopers.
And commodity plays also applied pressure, with a fresh fall in metals prices pushing Xstrata 79 pence under at 2,130, Rio Tinto down 92 pence at 2,675 and Anglo American 67 pence weaker at 2,359.
Broker comment saw Rolls Royce plunge down 11 pence at 469, as JP Morgan initiated the stock with an 'underweight' recommendation and 410 pence target price.
The broker said its target price implies a 15 percent capital loss, and added that while the shares have performed very strongly in the past three years, the cycle might be coming to an end.
Amvescap was the biggest casualty after shares in the investment group fell by 24 pence -- or 3.91 percent -- to close at 590.50.
Hays was the second biggest faller, down 6 pence -- or 3.80 percent -- to close at 152.
International Power was among the few FTSE 100 risers, up 3.50 pence -- or 1.03 percent -- at 342, helped by vague RWE bid speculation. This helped the group finish second on the FTSE 100 leaderboard.
British Energy was the top performer, up 23 pence higher -- or 5.39 percent -- at 450, as UBS argued the energy provider's share price slump yesterday was an overreaction and now presented a buying opportunity.
On Monday, British Energy shares fell 24 percent after closing two further reactors due to cracks found in boiler tubes.
UBS upgraded the stock to 'buy' from 'neutral', saying British Energy's performance was well flagged at the company's listing last year and was already embedded in its cautious output assumptions.
Separately, Goldman Sachs also upgraded its stance to 'neutral' from 'sell', saying the shares are now in line with its new price target of 434 pence, down from 384 previously.
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